How to Calculate Builders Risk Insurance: Formula & Factors

Builders risk insurance protects your construction project from loss or damage during the build phase. Calculating its cost requires understanding your project’s scope, duration, value, and risks.

1. Builders Risk Insurance Premium Formula

The premium is usually 1% to 5% of the total project value, including:

• Materials

• Labor

• Soft costs (e.g. permits, engineering, interest)

Formula:

2. Key Factors That Affect the Premium

Several elements impact the final rate:

• Total insured value – The higher the project cost, the higher the premium.

• Project duration – Longer construction periods increase exposure.

• Location – Areas prone to hurricanes, wildfires, or vandalism usually cost more.

• Construction materials – Fire-resistant or non-combustible materials lower the rate.

• Policy additions – Optional coverages like flood, theft, or debris removal raise the cost.

3. Step-by-Step Example

Project Value: $400,000
Estimated Rate: 2.5%
Premium Calculation:
$400,000 × 0.025 = $10,000

This is a general estimate—your rate may vary depending on the specific risk profile of your build.

4. Sample Cost Table

5. How to Reduce Premium Costs

• Bundle policies with general liability to get a multi-policy discount

• Raise the deductible to lower the premium, if you’re comfortable with higher risk

• Avoid unnecessary add-ons unless absolutely needed for your project

• Work with experienced brokers who can compare dozens of carriers and customize your coverage

Final Thoughts

To estimate builders risk insurance:

1. Add up your total project costs (labor + materials + soft costs)

2. Multiply by a risk rate between 1% and 5%

3. Adjust based on your build’s size, location, and duration

Need help calculating the exact premium for your construction project?
With over 30 years of experience and access to nearly 100 top carriers, THAgency will help you find the right policy at the best price. Send your request today and get personalized guidance.